Markets & Finance

Stocks Finish Mixed

July 12, 2005

Major stock indexes finished mixed in Wednesday's session. Some investors were waiting for quarterly results from Apple Computer (AAPL) and Advanced Micro Devices (AMD) after the market close, and the release of June consumer prices report Thursday morning, for signs of the market's direction, reports Standard & Poor's MarketScope.

The Dow Jones industrial average rose 33.22 points, or 0.32%, to 10,547.11, aided by a 1.8% gain in component IBM (IBM) on an analyst upgrade. The broader Standard & Poor's 500 index was up 0.02 point to 1,222.23. The tech-heavy Nasdaq composite fell 0.36 points, or 0.02%, to 2,142.79.

In the energy markets Wednesday, August West Texas Intermediate crude oil ended down 79 cents at $60.01 per barrel. The weekly energy inventory data from the EIA showed a crude stocks fell 3.9 million barrels, which was in-line with market expectation, though a large 3.2 million barrel rise in distillate stocks was the catalyst which drove the entire NYMEX complex lower, says Action Economics.

Tropical storm Emily moved to the periphery of the market's radar screen, with the storm now seen headed toward Mexico's Yucatan, clear of the oil and gas production rigs in the Northern Gulf of Mexico, says Action Economics.

Coming Thursday is an indicator of consumer spending. June retail sales is expected to jump 1.0%, while the ex-auto sales may be up 0.5%. The sharp rebound in unit vehicle sales suggests a large gain near 2% for the vehicle component, notes Action Economics. Hot weather, especially in the Northeast, suggests strength in seasonal-related items after a cool May, says Action.

An inflation gauge is also coming out Thursday morning. The June overall consumer price index (CPI) is expected to rise 0.3%, while the core index increases 0.2%. Action Economics says it expects the core index to be held down by vehicle prices, as the General Motors "employee discount for everyone" put notable downward pressure on prices.

After the market close Wednesday, Apple posted third quarter earnings per share of 37 cents, vs. 8 cents one year earlier, on a 75% revenue rise. The company expects fourth quarter revenue of about $3.5 billion and EPS of 32 cents. The shares were up in after-hours trading Wednesday after closing the regular session higher.

Also after Wednesday's closing bell, AMD reported earnings per share of 3 cents, vs. 9 cents a year ago quarter, on flat sales of $1.26 billion.

Companies on Thursday's earnings calendar include UnitedHealth Group (UNH), Marriott International (MAR), and Genzyme (GENZ).

In economic news Wednesday, the U.S. trade deficit narrowed slightly to $55.3 billion in May, from $57.0 billion in April. That's a little better than the $57 billion forecast. Imports fell 0.9% after a 4.3% surge in May; exports rose 0.1% after climbing 3.3% previously.

U.S. import prices rebounded 1.0% and export prices were flat in June, after respective declines of 1.0% (-1.3% previously) and 0.2% (previously -0.1%) in May. Petroleum prices rose 7.6% after falling 4.8% in May. Excluding petroleum, import prices were down 0.4%. Import prices accelerated to a 7.0% year-over-year growth rate, from 5.7%. Export prices are up 3.2% year-over-year, from 2.7% in May. The data continue to underscore the upward drift in prices, says Action Economics.

Among stocks on the move, HCA (HCA) lost ground after the hospital operator said it sees lower-than-expected second-quarter earnings per share of 88 cents to 92 cents. S&P downgraded the stock to hold from strong buy on the news.

Harley-Davidson (HDI) reported second-quarter earnings per share of 84 cents, vs. 83 cents a year ago, on a slight revenue rise. The motorcycle maker says given the number of shares repurchased during the first half, it now expects 2005 EPS growth to be in the 10%-13% range.

In other corporate news, The Wall Street Journal reports that cardiac stents made by Boston Scientific (BSX) continued to malfunction in operations performed after last year's temporary recall, doctors reported to the FDA.

Treasury Market

Treasury yields drifted higher in very shallow trading conditions, with the bond market looking ahead to Thursday's retail and inflation reports, and Greenspan's semiannual testimony next week, says Action Economics. While holding their cards tight in defensive positioning, dealers noted the narrower-than-expected trade deficit, which caused a boost to second-quarter gross domestic product projections, says Action. Supply also featured, with a lackluster showing on the 5-year note auction. The yield on the 10-year note rose to 4.16%.

World Markets

European stock markets ended higher on Wednesday. London's FTSE 100 index was up 28.7 points, or 0.55%, to 5,245.9 with help from some positive earnings reports.

Among stocks on the move, Burberry Group was sharply higher after the company, which is 66% owned by GUS, reported higher first-quarter sales. Marks & Spencer Group was higher after the company said its plans to boost profitability and cut costs remain intact even as a slowdown in consumer spending caused sales to drop for a seventh straight quarter. BP rose after the company said its Thunder Horse oil and natural- gas production platform in the Gulf of Mexico has stabilized after sustaining damage from Hurricane Dennis.

Germany's DAX index rose 26.86 points, or 0.58%, to 4,679.89 on bargain hunting. Commerzbank was higher on plans to cut as many as 600 jobs at the Mittelstand unit, its least profitable business. E.ON was lower on a report all prices that electricity and natural-gas grid owners charge competitors to use their networks will have to be approved by the regulator beginning in May 2006.

In Paris, the CAC 40 index gained 29.84 points, or 0.69%, to 4,343.62. Alcatel rose after reporting its second-quarter earnings were higher than expected. Carrefour fell after the company reported a less than expected 4.1% rise in second-quarter sales. Avanquest was higher after buying Germany's Magnaways online business.

Asian markets finished mixed on Wednesday. In Japan, the Nikkei index lost 32.3 points, or 0.28%, to 11,659.84 as the market consolidated recent gains.

In Hong Kong, the Hang Seng index climbed 160.35 points, or 1.13%, to 14,307.3 as an afternoon rally was led by property plays on the back of speculation the uptrend in housing prices will continue. A 2.6% jump in index heavyweight China Mobile also boosted the market. Stocks of companies with business in mainland China benefited from renewed speculation the country will revalue its currency, reports Standard & Poor's MarketScope.